Virgin Galactic (NYSE: SPCE) stock price continued its downtrend in the first quarter as concerns about its cash burn continued. It has plunged by more than 44% in the first quarter and by over 64% in the past 12 months.
Notably, the stock has crashed from its all-time high of $62.5 to just $1.36. That crash has brought its total market cap from over $20 billion to less than $600 million today. In simple terms, a $10,000 investment at its peak in 2021 would now be worth just $217.
High-risk investmentVirgin Galactic is a high-risk and potentially high-reward business. The company is working to become a leading player in the space tourism industry, which is expected to boom in the next few decades. However, it is still unclear whether this industry will live up to its hype as many technologies have proven before.
Virgin Galactic has been a cash incinerator for a long time. For starters, the company was started in 2004, meaning it has been in the business for 20 years. In this period, the firm has spent billions of dollars.
The company is now working on its Delta Class spaceships that will carry more people to space. It expects to start these trips in 2026. On the positive side, SPCE has over 700 reservations. 600 of these people paid $250k per ticket while the price has risen to $600k.
Virgin Galactic’s goal is noble considering that each space trip will be profitable. The firm estimates that its spaceport will handle about 300 flights a year. Each of these flights will cost about $3.6 million, bringing the total revenue to $1 billion.
The other positive is that the company has a strong balance sheet. It has over $982 million in cash and equivalents. Some of these funds came through share sales, which have increased its outstanding shares from 69 million in 2019 to almost 400 million today.
Virgin Galactic is burning vast sums of money and the trend will continue before it starts to generate revenue from the space business. The management believes that it will burn between $125 million and $135 million in Q1 after burning $114 million in the previous quarter.
If the trend continues, it means that Virgin Galactic will likely raise more cash in 2025 as the development continues. Worse, Richard Branson has already ruled out against providing more financing. Keep in mind that the company has over $450 million in long-term debt.
Virgin Galactic stock price forecast
The daily chart shows that the SPCE share price has been in a strong bearish trend. It is hovering at the crucial support point at $1.38, its lowest swing in October 2023. The stock has also formed an inverse cup and handle pattern, which is a popular bearish sign. It also remains sharply below the 50-day and 100-day Exponential Moving Averages (EMA).
The outlook for the stock is extremely bearish, meaning that it could collapse below the psychological point at $1.
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